FinCEN Expected to Announce Final Rule On Pre-Paid Access Cards In July 2011

Jun 09, 2011   

Prepaid access cards, also known as stored value cards, such as pre-paid gift and credit cards, are currently not subject to any of the rigorous cross-border reporting requirements of the Bank Secrecy Act and FinCEN regulations that other monetary instruments such as cash and checks are subject to. The practical result of such a loophole is that while individuals crossing the border into the United States from a foreign country must declare if they are transporting over $10,000 in cash, no such requirement exists for pre-paid access cards. Additionally, prepaid access cards are relatively easy to obtain and provide for anonymous use. As a result, of the numerous schemes drug traffickers use to funnel illegal proceeds out of the United States, one of the more popular is the use of stored value cards to launder and transport money across international borders.

However, that may soon change as FinCEN anticipates promulgating its final rules on prepaid access cards in July 2011. With the passage of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, FinCEN was mandated “not later than 270 days after the date of enactment” to “issue regulations in final form implementing the Bank Secrecy Act, regarding the sale, issuance, redemption, or international transport of stored value, including stored value cards.”

The anticipated final rules come at a time when FinCEN has been under increasing pressure from Congress to implement its mandate to address prepaid access cards. On March 14, 2011, the Senate Caucus on International Narcotics Control sent Secretary of the Treasury Timothy Geithner a letter voicing its displeasure with the Treasury Departments delay in promulgating final rules. Though FinCEN issued a notice of proposed rulemaking in June of 2010, no concrete timetable was established for the promulgation of the final rules. As a result, the Senate Caucus warned that “[a]bsent a renewed effort from the [Treasury] Department to propose and finalize a cross-border reporting requirement for prepaid access programs, including stored value, Congress will have to take action via the legislative process.” A copy of the Senate Caucuss letter can be read here.

Though the regulations will come later than mandated, when promulgated, such rules will provide a comprehensive regulatory framework currently lacking for non-bank issued prepaid access cards. The proposed rules place registration requirements on non-bank prepaid access card providers. Additionally, the proposed rules place suspicious activity reporting, customer information recordkeeping, and transactional recordkeeping requirements on both providers and sellers of prepaid access cards. The rules will also provide exemptions from the reporting requirements for categories of prepaid access products that pose a low risk of money laundering and terrorist financing. A copy of the proposed rules can be read here.

Fuerst Ittleman will continue to closely monitor this issue for the latest developments from FinCEN. If you have questions pertaining to the proposed prepaid access rules, the BSA, anti-money laundering compliance, or how to ensure that your business maintains regulatory compliance at both the state and federal levels please contact us at contact@fidjlaw.com.